West Australian Premier Colin Barnett has described a proposed $549 million reduction in the state's GST return as outrageous and galling.

The Commonwealth Grants Commission has recommended Western Australia receive around 5 per cent of Australia's total GST revenue in 2013-14.

Commission chair Alan Henderson says Western Australia has "unprecedented fiscal capacity" because of record growth in mining production.

The state is recommended to see a cut of $549 million from last year and a record low for the state.

"Western Australia's mining production continued to grow to the point where, by 2011-12, it had the capacity to raise nearly $2,200 per person in mining royalties compared with about $450 per person for all states," Mr Henderson said in a statement.

"This sustained growth and the associated impact on employment and wages elsewhere in the state gives it an unprecedented fiscal capacity.

"For equality, it only needs 44.6 per cent of the average GST for all Australians."

Mr Barnett says the decision is a huge blow to Western Australia's finances and cuts will have to be made.

"For the first time in Australian history, a state's share has fallen below 50 cents in the dollar," he said.

"That means we've got to cut back on expenditure and education and health, those services.

"That's grossly unfair for a growing state where over 1,000 people a week are coming to live in WA."

The Northern Territory has also been assessed as requiring a smaller share after 2011 census data revealed it shoulders less of the burden of delivering services to Indigenous people.

In contrast, the commission says Queensland needs a boost from 19.9 per cent to 21.5 per cent to make up for a fall in coal prices and production and a sluggish property market.

In total it means an extra $696 million in GST revenue.

Changes for the other states and territories are comparatively small.

GST revenue is expected to total $51 billion in 2013-14, up from $48.25 billion in 2012-13.

State

2012-13 share

2013-14 share

Change

New South Wales

30.6

30.9

+$193m

Victoria

22.9

22.6

-$207m

Queensland

19.9

21.5

+$696m

Western Australia

5.9

4.9

-$549m

South Australia

9.4

9.1

-$82m

Tasmania

3.6

3.6

+$36m

Australian Capital Territory

2.0

2.0

+$18m

Northern Territory

5.7

5.4

-$107m

'Independent process'

It is up to the Federal Treasurer, Wayne Swan, to decide whether to implement the commission's recommendations.

Anticipating ire from the West Australian government, federal Labor frontbencher Craig Emerson said the Commonwealth was merely adhering to the recommendations of an independent agency.

"It's an independent process," he said.

"As a consequence of that, some states will lose, some states will win.

"I'm advised that it is $100 million more than the WA Government had budgeted for."